2-7-18 12:53 PM EST | Email Article

By Robert Wall

 

European planemaker Airbus SE Wednesday said it could face another "material" charge to earnings on the A400M military transport plane as it won an agreement with key customers to restructure the beleaguered program.

Airbus and several buyers of the A400M plane for months have been in talks over contract changes after the plane maker a year ago warned the current arrangement is too onerous. Airbus has suffered big losses on the A400M that has fallen behind schedule, leading to cost overruns and financial penalties.

Airbus on Wednesday said it had signed a declaration of intent with Germany, France, the U.K., Spain, Turkey, Belgium, Luxembourg to define how the contract would be amended. The accord spells out revised plane delivery plans and how missing features will be added.

Airbus said it is assessing the financial impact of the new plan and warned it could hit 2017 earnings it expects to report next week. Future financial exposure should be more limited, Airbus said. The company has taken around EUR7 billion in charges on the program that risks losing money unless it wins big export orders.

Airbus Chief Executive Officer Tom Enders said that "since its inception in 2003, this program has suffered not only from a number of operational issues but, more importantly, under a flawed contractual set-up and insufficient budget which resulted in significant losses for Airbus as prime contractor. We have a good chance to stop or at least reduce the bleeding now and deliver the capabilities our customers need."

Under the original governmental contract for the A400M, Airbus agreed in 2003 to absorb most of the development risk, a structure more customary for commercial planes than an advanced military aircraft. Mr. Enders last year called the setup-along with an insufficient budget and over-ambitious schedule at the outset--the program's "original sin."

Airbus already won an agreement from A400M customers in 2010 to ease some contractual terms after it threatened to walk away from developing the plane.

The first A400M entered service with the French air force in 2013. It has won a total of 174 plane orders.

The new contract is due to be signed this year, Airbus said.

 

Write to Robert Wall at Robert.Wall@wsj.com

 

(END) Dow Jones Newswires

February 07, 2018 12:53 ET (17:53 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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